John Irving As Liquidator of Mawson KLM Holdings P/L (in Liq) & Anor v Starmaker (No 51) P/L (No 2) - [2005] SASC 310

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
JOHN IRVING AS LIQUIDATOR OF MAWSON KLM HOLDINGS P/L (IN LIQ) & ANOR v STARMAKER (NO 51) P/L (No 2)
Judgment of The Honourable Justice Layton
17 August 2005
APPEAL AND NEW TRIAL
PROCEDURE - COSTS - SECURITY FOR COSTS
Appeal against decision of a Master dismissing application for security for costs - consideration of Supreme Court Rules (SA) and Corporations Act 2001 (Cth) - whether claims and remedies sought by the parties to a joint venture agreement were separate - whether Master erred in characterising the relief sought - whether claims of the parties involved overlapping evidence - consideration of the discretion of the Court to order security for costs - whether appropriate to order security for costs against liquidator, insolvent company where there is a litigation funding agreement - whether absence of material as to assets and liabilities before the Court a consideration as to the inability of a party to fulfil obligations for costs if unsuccessful - whether delay in applying for security for costs a barrier - appeal allowed.
Supreme Court Rules 1987 (SA) r 100.01; Corporations Act 2001 (Cth) s 1335(1); Real Property Act 1886 (SA) s 223LB, referred to.
Australian Building Industries Pty Ltd (in Liq) v Stramit Corp Ltd [2000] FCA 455; Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25; Dart Industries Inc v The Decor Corporation Pty Ltd & Anor (1993) 179 CLR 101; Dictating Machine Centre Pty Ltd v Combe (1981) 26 SASR 316; Dwyer and Maxted v Canning Vale [2005] SASC 80; Epic Feast Ltd v Mawson KLM Holdings Pty Ltd (In Liquidation) (1998) 71 SASR 161; Hession v Century 21 South Pacific Ltd (in liq) (1992) 28 NSWLR 120; Idoport Pty Ltd & Anor v National Bank Ltd & Ors [2001] NSWSC 744; Jownal v Commonwealth Bank of Australia [1999] SASC 72; KP Cable Investments Pty Ltd & Ors v Meltglow Pty Ltd (1995) 56 FCR 189; La Rosa Constructions Pty Ltd v PWR Developments Pty Limited [2004] NSWSC 235; Mullett & Anor v Gabriel & Anor (1989) 52 SASR 330; Newtrend Pty Ltd v Oceanic Life Ltd [1990] WAR 1; Octocan v SRJ Investments Pty Ltd & Ors (1999) 74 SASR 471; Star v National Australia Bank Ltd [1999] NSWSC 353; Tradestock Pty Ltd v TNT (Management) Pty Ltd & Ors (1977) 14 ALR 52; Warman International Ltd v Dwyer & Ors (1995) 182 CLR 544, considered.

JOHN IRVING AS LIQUIDATOR OF MAWSON KLM HOLDINGS P/L (IN LIQ) & ANOR v STARMAKER (NO 51) P/L (No 2)
[2005] SASC 310

LAYTON J: This is an appeal from the decision of a Master of the Supreme Court to dismiss an application for security for costs pursuant to Rule 100.01 of the Supreme Court Rules 1987 (“the Rules”) and s 1335(1) of the Corporations Act 2001 (Cth) (“the Act”).
The application was taken out by the defendant, Starmaker (No 51) Pty Ltd (“Starmaker”) by a Notice for Specific Directions filed on 4 March 2005, initially seeking security for costs against the plaintiffs, John Irving, as Liquidator for Mawson KLM Holdings Pty Ltd (“Irving”) and Mawson KLM Holdings Pty Ltd (“Mawson”). The application was subsequently modified before the Master at the hearing and became an application for security against only Mawson.
The issues on this appeal raise questions of whether security for costs are appropriate to be ordered against either a liquidator or an insolvent company in circumstances where there is a litigation funding agreement, and in addition, what the relevant principles for a court are when deciding whether to grant an order for security. These issues are raised in the context of complex litigation which involve not only this action but other court proceedings between the parties. In summary, Mawson was wound up on the application of Starmaker following non-payment of taxed costs ordered in its favour in another action.
Subsequently this action was instituted by the Liquidator of Mawson against Starmaker seeking declarations that three transactions between Mawson and Starmaker, namely, a loan, an option agreement and a joint venture agreement be declared as either unfair, uncommercial or as an insolvent transaction under the Corporations Law and accordingly seeking appropriate remedies. Starmaker is defending the action by denying the allegations and also making alternative contentions of illegality, statutory non-compliance and set off.
There have been many applications made in this action and this appeal is but one.
History of this appeal
As indicated earlier the background to this matter is complex. The three transactions, the subject of the action, were entered into between Mawson and Starmaker in 1995 and 1996 and are herein referred to as the Loan Transaction, the Option Agreement and a Joint Venture Agreement (“the JVA”). The relevant facts for this appeal are:
·Mawson entered into an agreement to buy land from the Government and borrowed $1,220,000 from Starmaker in order to settle the contract
·Starmaker secured the loan by a first mortgage over the land (“the Loan Transaction”) and obtained an Option Agreement (“the Option Agreement”) whereby if the loan and interest were not repaid then Starmaker could demand a transfer to itself of the land
·In November 1996 Starmaker exercised the Option Agreement. At the same time Mawson and Starmaker entered into the JVA which included conditions that the surplus of sale proceeds over and above the loan and interest would be divided equally between them.
·Starmaker sold the land on 2 March 1999 for $2.45 million. Starmaker did not account to Mawson the half share of the surplus funds.
·Irving commenced this action on 15 September 2000 and Mawson was joined in the action on 5 March 2003.
·Starmaker then sought security for costs.
Decision of the Master
At the hearing before the Master, Starmaker relied on a number of affidavits of Mr Matthew Deller,[1] detailed written submissions dated 21 April 2005, and oral submissions in support of the application for security for costs. There were four distinct points put to the Master in support of the application:
·Mawson had no assets to meet any order for costs.
·There was a prospect that separate orders for costs could be made for and against the parties in this action.
·A litigation fund, purporting to stand behind the plaintiffs, did not give adequate protection to Starmaker for costs in the event of Mawson failing in its action.
·The merits of the case were not overwhelmingly in favour of the plaintiffs and further, that neither the respondents nor the litigation fund placed any material before the Court nor offered any undertaking to satisfy the costs of Starmaker in the event that it was successful in defending the action.
[1] Affidavit, M D Deller, sworn 4 March 2005, 21 March 2005, 15 April 2005, 18 April 2005.
The Master dismissed the application for security for costs on the following grounds which are now the subject of the appeal before me.
Reasons of the Master
The Master in paragraph 5 of his reasons made the following findings:
The first plaintiff as liquidator of the second plaintiff seeks orders under division 2 of Part 5.7B of the then Corporations Law to avoid each of these three transactions and for consequential repayments flowing from such avoidances. Under s 588F(1) of the Corporations Law it is the liquidator personally who is the proper plaintiff for such applications under Division 2 and not the company in liquidation: Horn v York Paper Co Ltd (1991) 5 ACSR 112.
The Master continued at paragraph 6:
…The effect of the statement of claim is that if the first plaintiff’s application to avoid the joint venture agreement fails, then the second plaintiff claims an account and inquiry as to the amount due to it on the joint venture. (There is a pleading that in 1999 the defendant sold land which was the subject of the joint venture and has retained the proceeds of sale.) Of particular significance is that this sole claim by the second plaintiff only arises for consideration if the claim by the first plaintiff for the avoidance of the joint venture agreement fails. The second plaintiff’s claim cannot succeed if the joint venture is avoided because it is based on there being a legally effectual joint venture agreement. If the first plaintiff fails in having the joint venture agreement avoided, it seems almost inevitable that an order for costs will be make against him in favour of the defendant (Rule 101.02(1)).
Further the Master continued at paragraph 12:
…For the reasons set out above it seems almost inevitable that if the first plaintiff fails to have the joint venture agreement avoided, he will be ordered to pay the defendant’s costs. (It is theoretically possible that the first plaintiff could succeed on either the loan transaction and/or the option transaction but fail on the joint venture transaction, but in that event it is likely that he will be penalised in the overall costs order for having failed on a distinct major cause of action.) This means that if the Court gets to the point of having to consider the second plaintiff’s claim arising under the joint venture the defendant will almost certainly have an order against the first plaintiff for its costs of the action or at least that part of it represented by the joint venture agreement. If the second plaintiff then also failed on its claim it is most unlikely that there would be any costs ordered against it which would not also have already been ordered against the first plaintiff.
As a consequence of the above findings, the Master concluded that as there were no exceptional circumstances whereby Irving as a liquidator and natural person was required to show that he had the means to meet any adverse order for costs, the order for security should be refused.
Void or voidable and whether overlapping evidence
Counsel for Starmaker argued that the Master failed to distinguish between the separate claims of Irving and Mawson in relation to the JVA. It was submitted that this, in part, was demonstrated by the Master erroneously using the word "avoided" instead of the word “voidable” in relation to the claim and relief sought by Irving. It was submitted that this error led the Master into wrongly refusing the application for security for costs.
The Amended Third Amended Application (“the Application”) and the Third Amended Statement of Claim (“the Statement of Claim”) in relation to the JVA transaction allege that the JVA is a “voidable” transaction pursuant to s588FB(1) of the Act and a declaration was sought pursuant to s 588FE(3) that it was a “voidable” transaction. The specific relief sought is that:
Starmaker pay to the plaintiff the equity of Mawson in the land lost to Mawson by virtue of the transaction comprised in the Joint Venture Agreement or such other amount as the Court deems just.[2]
[2] See the application at subparagraphs (g), (h) and (i). Also paragraph 20 of the Statement of Claim.
The relevant sub-sections of the Act which are referred to in the Application and the Statement of Claim all concern "voidable" transactions. It is also apparent that the relief being sought in relation to the Act is not relief based on a claim to "avoid" the transaction.[3]
[3] Section 588FF(1) of the Act permits a court to make a number of orders where it is satisfied that a transaction is "voidable", one of which, s588FF(1)(h) includes an order declaring that the agreement is "void". This claim is not being made in either the Application or the Statement of Claim.
I consider that the Master was wrong in his characterisation that the relief sought by Irving was in fact an avoidance of the JVA. Instead, the relief sought appears to seek damages or compensation based on the “equity which Mawson lost in the land” by reason of the transaction. This relief is not sought on the basis of treating the JVA as void. No quantum is specified and the claim appears to require assessment by the Court.
In relation to the claim made by Mawson for breach of the JVA, the relief sought is for "an account and inquiry of the amount due to Mawson”.[4]
[4] See application paragraph (j) and (k).
In relation to these two claims and relief sought by the respective plaintiffs, there is a fundamental difference between an account for profits and either damages or compensation, whether at common law or in equity.
Windeyer J distinguished the functions of the two remedies in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd[5] in the following terms:
The distinction between an account of profits and damages is that by the former the infringer is required to give up his ill-gotten gains to the party whose rights he has infringed: by the latter he is required to compensate the party wronged for the loss he has suffered. The two computations can obviously yield different results, for a plaintiff's loss is not to be measured by the defendant's gain, nor a defendant's gain by the plaintiff's loss. Either may be greater, or less, than the other. If a plaintiff elects to take an inquiry as to damages the loss to him of profits which he might have made may be a substantial element of his claim… But what a plaintiff might have made had the defendant not invaded his rights is by no means the same thing as what the defendant did make by doing so.[6] (citations omitted)
[5] (1968) 122 CLR 25.
[6] Ibid at p 32. See also Dart Industries Inc v The Decor Corporation Pty Ltd& Anor (1993) 179 CLR 101.
There is also a requirement to elect which remedy is being sought[7]. The fact that such election is required is an important feature which emphasises the distinction between the remedies.
[7] see Warman International Ltd v Dwyer & Ors (1995) 182 CLR 544.
Further, discretionary factors may prevent a successful plaintiff from electing for an account of profits, which is another important point of distinction between account for profits and compensation or the remedy of damages. Particular factors which may affect the court's discretion are delay, knowledge, and the degree of difficulty in calculating the profit.
Based on this analysis alone, I consider that the Master was wrong in his reasons. The Master was wrong in paragraph 5 of his reasons in characterising the claim of Irving as seeking an order to “avoid” the JVA. As a result the Master was in error in paragraph 6 of his reasons when he decided that the claim by Mawson only arises if the claim by Irving in relation to the JVA fails. Further the Master was wrong when he stated that Mawson's claim ‘cannot succeed’ if Irving's claim fails.
The Master was also incorrect in his analysis in paragraph 12 regarding the effect of a failure of the claim by Irving in relation to the JVA. In this paragraph the Master wrongly makes the assumption that the claim by Mawson is only relevant after the claim by Irving has failed. There are two separate claims being made by the parties with two separate remedies which can both proceed at trial.
There is, however, a further issue relevant to security for costs, namely, whether the claims of Irving and Mawson may involve overlapping evidence such that Mawson, even if it was not successful, would be unlikely to have any costs ordered against it.
The factual circumstances of a claim under the Act for the JVA to be declared voidable and a claim for breach of the JVA may involve different issues, but the proof of the facts in each case may arise from the overall circumstances of the transaction between the parties. It is reasonable to assume that there would be some overlapping. However, the evidence required for the relief is a different matter. There is a different process involved in an inquiry and account of the profits of Starmaker on the one hand, and an assessment of the loss to Mawson following the breach of the JVA, on the other. Whilst there may be some overlapping of evidence, the exercise is fundamentally different.
In addition to this difference, Starmaker in paragraphs 10 to 14 of its Fourth Amended Defence includes the following allegations by way of defence to the claim by Mawson:
·Mawson itself acted in breach of the JVA and repudiated the agreement;
·Starmaker accepted the repudiation or itself terminated the JVA agreement due to Mawson's breach;
·consequentially there was no entitlement to either an account or inquiry or for payment;
·in the further alternative if the JVA has not been repudiated and/or terminated, it was procured by misrepresentations by omissions and by silence;
·therefore Starmaker is entitled to an order rescinding the JVA;
·further and in the alternative if the JVA has not been repudiated or terminated, it is nonetheless void for illegality and non-compliance with s223LB of the Real Property Act1886 (SA);
·further Starmaker is entitled to a set off against the claim of Mawson and to an order for payment of costs in Supreme Court action 2227 of 1996 (being an action instituted by Mawson against Starmaker and the Registrar General of South Australia).
Whilst the factual matrix upon which these matters rest may include facts which are also relevant to the action by Irving, I consider that many of them involve “stand alone” issues.
In summary, I consider that the Master erred in finding that Starmaker would be adequately protected for its costs if Mawson also failed in its claim as it would be ‘most unlikely that there would be any costs ordered against’ Mawson; or to put it the other way ‘there would be a high degree of likelihood’ that Starmaker would obtain an order for costs against Irving. On the contrary, I consider that there could be some potentially complex arguments as to liability for costs in the event of the respondents being wholly or partially unsuccessful in their respective claims against Starmaker.
Whether security should be ordered
Whilst I have concluded that the Master was wrong in relation to his primary reason for rejecting security for costs, that does not mean that the discretion to order security for costs should therefore be made. It is necessary for me to now consider whether I should exercise that discretion in favour of Starmaker[8].
[8] Mullett & Anor v Gabriel (1989) 52 SASR 330, 333.
The Law
The application for security for costs has been sought pursuant to Supreme Court Rule 100 .01 and section 1335 (1) of the Act.
Rule 100.01 gives the Court a wide discretion to order security and provides that:
The Court may order security for costs to be furnished:
Plaintiff insolvent and nominal
(a)     where the plaintiff is a mere nominal plaintiff and is in a condition of poverty or insolvency;
Plaintiff is ordinarily resident out of the State
(b)     where the plaintiff is ordinarily resident out of the jurisdiction;
Residence of plaintiff misstated with intention to deceive
(c)     where the residence of the plaintiff is incorrectly stated in the summons with an intention to deceive;
Authorised by statute
(d)     in circumstances authorised by any statute;
Special circumstances
(e)     where for special circumstances the justice of the case so requires.
Section 1335 (1) of the Act provides:
Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is a reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.

The principles which are applicable to deciding whether or not to grant security have been set out in a number of cases. In particular they have been discussed in Dictating Machine Centre Pty Ltd v Combe[9], Octocan v SRJ Property Development Pty Ltd[10] and KPCable Investments Pty Ltd & Ors v Meltglow Pty Ltd.[11] These principles are to be considered in the context of the purpose for which security for costs is given, namely as a matter of public interest to ensure that at the end of the day a successful defendant is not deprived of the effect of a judgment by reason of the impecuniosity of a plaintiff.[12]
[9] (1981) 26 SASR 316 per Mitchell J who identified seven specific factors considered relevant to the exercise of discretion on an application for security for costs.
[10] (1999) 74 SASR 471 which was an appeal against an order for security for costs and also refers to s 1335 (1) of the Corporations Act 2001 (Cth).
[11] (1995) 56 FCR 189.
[12] Idoport Pty Limited & Anor v National Australia Bank Limited and Ors [2001] NSWSC 744 [51-52].
The following principles are relevant to this application:
Whether Mawson’s claim is bona fide
The onus is on Starmaker to make out any argument that the claim of Mawson against Starmaker is not bona fide.[13] I am not so satisfied, or to put it another way I am not satisfied that the argument of Mawson in relation to the JVA is a sham. In relation to the reliance by Mawson on an observation made by Debelle J[14] in a related action describing the interest rate as “usurious”, that comment of his Honour was dicta and was said in relation to the Loan Transaction and not the JVA.
[13] Dictating Machine Centre Pty Ltd v Combe (1981) 26 SASR 316.
[14] Epic Feast Ltd v Mawson KLM Holdings Pty Ltd (in Liquidation) (1998) 71 SASR 161 at 173.
Impecuniosity of Mawson and whether it was caused by Starmaker
I am satisfied that Mawson is presently impecunious as demonstrated by the fact that it has been in liquidation since 4 November 1997.
On the material that I have before me, I am not satisfied for the purposes of these proceedings that the impecuniosity of Mawson in relation to its claim against Starmaker has been caused by the alleged conduct of Starmaker in breaching the JVA or indeed as a consequence of the other conduct alleged against Starmaker by Irving. The arrangements entered into between the parties which are the subject of this action, have arisen as a result of Mawson being in serious economically strained circumstances as a result of a contract between the Minister for Tourism of 17 November 1995 to settle on the purchase land for $1,722,820.00. In particular, I note from the Statement of Claim that Irving is alleging that Mawson was insolvent at the time when it entered into the Loan Transaction and the Option Agreement with Starmaker on 9 July 1996 (paragraphs 5.1, 5.2 and 19.3 of the Statement of Claim). The JVA was not entered into until later in November 1996 (paragraph 10).
Further, the fact that the application to wind up Mawson was made by Starmaker as a consequence of a costs order for $32,508.30 made against Mawson in an action brought by Starmaker, would not be an impediment to an application for security for costs.
In so concluding, I hasten to add that I am in no way deciding one of the fundamental arguments which will be addressed by Irving and Mawson at trial, namely that Starmaker in effect took advantage of the financial plight of Mawson in entering into these transactions. I am simply considering the principles relevant to security for costs based on the limited material before me.
Whether other persons behind Mawson stand to benefit from the claim or can indemnify Mawson
It is common ground between the parties that there is a Litigation Funding Agreement (“the Funding Agreement”) entered into between the respondents with ALF Litigation Investment Fund No 1 Pty Ltd (“ the ALF Fund”). The sole shareholder of the ALF Fund is Australian Litigation Fund Pty Ltd (“the Funding Corporation”).
It was submitted by counsel for the respondents, that if the action of Irving was unsuccessful, Irving would be liable to pay any adverse costs personally and that if Mawson is unsuccessful in its claim, it is indemnified pursuant to clause 25 of the Funding Agreement. In considering this argument, a number of features of the Funding Agreement are relevant:
·The ALF Fund is a single director/shareholder $1.00 company owned by the Funding Corporation and does not own real property in South Australia
·The Funding Corporation has 14 shareholders who do not have a pre-existing interest in the subject of this action and who do not appear to be creditors of Mawson (Affidavit of M D Deller sworn 15 April 2005).
·The ALF Fund and the Funding corporation specialise in funding of litigation as an investment[15].
·Clause 16 of the Funding Agreement allows the ALF Fund to terminate the agreement upon 15 days notice. Termination may also occur if there is a default by Mawson in the performance of any of its obligations pursuant to the Funding Agreement. Termination may occur without notice to Starmaker.
·Clause 17 of the Funding Agreement provides that the ALF Fund is responsible for all amounts payable up until the date of termination.
·Clause 26.4 of the Funding Agreement enables the ALF Fund to exercise discretion as to whether or not to meet any order for security for costs in the action. This may be done without any notice to Starmaker
·Clause 14 of the Funding Agreement prevents both Irving and Mawson from making or accepting any offer of settlement in this action without the prior notification to and consent of the ALF Fund.
[15] Exhibits MDD3 and MDD4 to the affidavit of M D Deller sworn 15 April 2005.
It is therefore submitted by Starmaker that the contractual indemnity provided by the ALF Fund is unsatisfactory because it may be terminated without notice to Starmaker and any assets which it may have are likely to be beyond the reach of the Court. Further, Starmaker drew attention to the fact that no financial information has been placed before this Court by way of any statement of assets and liabilities of the company or its shareholders. It is therefore submitted that the ALF Fund has an active and controlling role in the proceedings and stands to profit from them but at the same time may relieve itself from exposure to liability for costs of Starmaker.
I consider in general terms that there is validity in the arguments by counsel for Starmaker that it has is no demonstrable assurance that any costs which may be ordered against Mawson will necessarily be satisfied through the Funding Agreement.
Information of ability to pay costs
Counsel for Starmaker submitted that the respondents have had the opportunity of putting information before the Court relevant to whether or not security should be granted and, in particular, information as to assets and liabilities. Neither the respondents, the ALF Fund nor the Funding Corporation have placed such information before the Court.
Many authorities support the proposition that it is incumbent upon a plaintiff who wishes to resist an application for security to put before a court a full and frank statement of assets and liabilities, not only of the plaintiff but also of shareholders.[16] The absence of such material does not mean that a court should necessarily conclude that a particular litigant may not have sufficient resources to meet an order for security for costs. It is a relevant circumstance for a court to take into account, particularly if there is some doubt about the ability of a party being able to fulfil any obligations for costs if unsuccessful.[17]
[16] Tradestock Pty Ltd v TNT (Management) Pty Ltd &Ors (1977) 14 ALR 52 at 56-57 which refers to the opportunities of parties to put facts and circumstances relevant to the problem before the court; Newtrend Pty Ltd v Oceanic Life Ltd [1990] WAR 1, Idoport Pty Limited & Another v National Australia Bank Limited and Others [2001] NSWSC 744 at [66].
[17] Jownal v Commonwealth Bank of Australia [1999] SASC 72 at [47] to [52].
Applying these principles to the situation of the respondents and their litigation funding, there is inadequate information so far as the ALF Fund and the Funding Corporation is concerned for the reasons I have expressed above.
So far as Mawson is concerned, it is clearly not in a position to pay any costs which may be awarded if it is unsuccessful in its claim. Liquidation per se is no barrier to granting an order for security against a company that is in liquidation where that company is itself the litigant.[18] A special factor justifying an order for security of costs includes whether a winding up order has been made in relation to a plaintiff company.[19] The tension which exists between s 1335 of the Act and other sections such as s 588 FE and FF which permit a liquidator to take proceedings to set aside transactions in which a company is insolvent, has been articulated by Rolfe J in Star v National Australia Bank Ltd..[20]
[18] Australian Building Industries Pty Ltd (In Liq) v Stramit Corp Ltd [2000] FCA 455; Hession v Century 21 South Pacific Ltd (In Liq) (1992) 28 NSWLR 120 at 123; Star v National Australia BankLtd [1999] NSWSC 353.
[19] La Rosa Constructions Pty Ltd v PWR Developments Pty Ltd [2004] NSWSC 235 [57].
[20] [1999] NSWSC 353 at [8].
In relation to Irving, the Master in his reasons correctly referred to the fact that unless there are exceptional circumstances, a liquidator who is the plaintiff in person is not required to show that he has the means to meet any adverse order for costs or to be made liable for security. The Master in support of this proposition appropriately referred to one of his own earlier decisions of Dwyer and Maxted v Canning Vale.[21] I consider the proposition to be correct and do not consider those circumstances exist here.
[21] [2005] SASC 80.
Delay
An important factor in relation to whether an order for security for costs ought to be given, is that it should be sought promptly and without delay. The respondents argue that there has been delay and that Mawson was joined in this action in 2003 and it is only now that an application is being sought for security.
Delay is one of the matters relevant to security for costs. However, consideration is also required to be given for any reasons given for delay as well as any prejudice which may result from any delay.
In this case, Starmaker proffered the reasons for delay as being the fact that they only became aware of the existence of the Funding Agreement on or about 7 May 2004. Thereafter, it sought copies of the Funding Agreement by letter dated 7 May 2004. A copy of the Funding Agreement was only supplied to Starmaker in November 2004, following an application made by it in Action Number 1361 of 1997. Starmaker at that time placed the ALF Fund on notice that it intended to seek security for costs. No submission was made before me by the respondents that the application for security for costs resulted in any prejudice. In those circumstances I do not consider that the delay itself to be a barrier to an order being made for security.
What security and against whom?
Having regard to the above matters and in the exercise of my discretion, I consider it appropriate that there be an order for security for costs to be made against Mawson. It should not be in relation to all of the costs but only a proportion and should only be in relation to security for costs hereafter. I do not have sufficient information before me to decide what proportion, and it may be that the security could be provided by an appropriate indemnity given on behalf of Mawson by a person or body which can satisfy the Court that it has an appropriate capacity to pay any costs.
I will hear the parties further as to the quantum and form of such security.
Orders
1.      That the appeal be allowed.
2.      That Mawson be required to provide security for costs as from this date until trial.
3.      I will hear the parties further as to the quantum and form of that security.
4.      That Starmaker have costs of the application and the appeal before me to be agreed or taxed.